Commodity ETF Alert March 2010 Portfolio Update
March 23, 2010
Once certain Greek bailout now in question…
Maybe you remember the talk of the markets about a month ago. It was all about Greece and how they were likely to default on their debt obligations. The result was a stunning drop in the Euro and a run up in the U.S. Dollar.
As you know, dollar strength can translate into weakness in commodities. And that’s what we saw at the time. Commodities were pummeled as the dollar rose.
But then the fears subsided for awhile…
Greece put forth plans to drastically tighten its budget. It did its best to reassure the market they wouldn’t default.
And the market believed it… the Euro stabilized and commodities rallied. Many thought Greece was going to get a bailout by members of the European Union (like Germany and France).
But now it appears they’re back to square one…
Analysts are realizing the Greek budget cuts are too extreme to be realistic. Germany recently said they don’t want anything to do with bailing out Greece. Uncertainty is creeping back in as the Euro resumes its downward plunge. As a result, the U.S. Dollar has surged in recent trading.
What does all this mean?
Commodity prices may get volatile as the uncertainty in Europe continues. We could see some large movements in oil and gold prices over the next couple of weeks. The fundamental views on our open positions remain the same.
Just be prepared for some volatility…
Now, let’s take a look at our open positions…
Position Updates
. . . . iPath S&P GSCI Crude Oil Total Return ETN (OIL) – HOLD
Crude is trading just below the recent highs near $82.50. We’re still at the upper end of the trading range for crude. A break above $82.50 in crude and we could see prices sitting around $90 within a month.
Even though crude inventories are growing, which is bearish for crude, the stock market and the crude oil market seem to have a “floor” built under them. Many analysts think the economy is recovering quickly. Crude demand will increase and prices will rise if the economic recovery sustains itself.
. . . . iShares Silver Trust (SLV) – HOLD
Silver prices are holding around the $17-$17.50 area. We’ve had many great opportunities to buy SLV below our $17 buy up to price. Keep SLV as a hold going forward. Our price target is $25.
. . . . iShares COMEX Gold Trust (IAU) – HOLD
Gold is still looking choppy in the short term as the price fluctuates around the $1,100 range. Gold may remain a little weak in the next two months due to seasonal factors.
If for some reason a worst case scenario develops in Europe, the dollar could have a huge rally. This in turn may push gold back down to the $1,000 level. This would be a great buying opportunity for gold. The odds of this happening are low, but you never know. Predicting how the situation in Europe will play out is a guessing game.
Bottom line… just be patient and keep holding for future gains.
. . . . iPath DJ AIG Grains ETN (JJG) – Buy up to $37.00
JJG is still trading around our buy up to price. Keep holding as the spring planting season progresses. Seasonal price volatility should start showing up within the next month or so…
. . . . ETFs Physical Palladium (PALL) – Buy up to $47.75
Palladium prices have been volatile around the recent highs. Our position in PALL has gone as high as $48.28 and as low as $45.00 in recent trading. We expect PALL to continue this volatility going forward as it’s a relatively new ETF.
Remember, we have a half position in PALL. We were looking for PALL to pull back to the lower $40 range to enter our other half position. But PALL is not pulling back as much as we thought. If it doesn’t do so within the next two weeks, go ahead and buy the other half of the position anywhere below $47.75.
Category: Commodity Trading
